PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
ENSTAR INCOME PROGRAM 1984-1, L.P.
CONDENSED STATEMENT OF NET ASSETS IN LIQUIDATION
(SEE NOTE 2)
AS OF SEPTEMBER 30, 2003
(Unaudited)
ASSETS:
Cash and cash equivalents........................................ $ 3,093,900
Due from General Partners........................................ 54,700
Escrow deposits.................................................. 120,900
------------
Total assets............................................... $ 3,269,500
============
LIABILITIES:
Accounts payable................................................. $ 170,700
Accrued liabilities.............................................. 234,900
Due to purchasers................................................ 189,200
Due to affiliates................................................ 805,700
------------
Total liabilities......................................... 1,400,500
------------
NET ASSETS IN LIQUIDATION:
General Partner.................................................. --
Limited Partners................................................. 1,869,000
------------
$ 1,869,000
============
See accompanying notes to condensed financial statements.
ENSTAR INCOME PROGRAM 1984-1, L.P.
CONDENSED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(See Note 2)
FOR THE PERIOD FROM AUGUST 1, 2003 TO SEPTEMBER 30, 2003
(Unaudited)
Additions:
Revenues.................................................... $ 226,400
Interest income............................................. 300
---------
Total additions......................................... 226,700
---------
Deductions:
Service costs............................................... 124,400
General and administrative expenses......................... 78,200
General partner and management fees and reimbursed expense.. 18,700
Capital expenditures........................................ 43,500
---------
Total deductions........................................ 264,800
---------
Recognition of accrued net operating results.................. 38,100
---------
Net change in net assets in liquidation....................... --
NET ASSETS IN LIQUIDATION, beginning of period................ 1,869,000
---------
NET ASSETS IN LIQUIDATION, end of period...................... $1,869,000
=========
See accompanying notes to condensed financial statements.
ENSTAR INCOME PROGRAM 1984-1, L.P.
CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 2002
ASSETS
ASSETS:
Cash and cash equivalents..................................................... $ 1,185,600
Accounts receivable, less allowance for doubtful accounts of $11,700.......... 78,900
Prepaid expenses and other assets............................................. 39,800
Property, plant and equipment, net of accumulated depreciation
of $11,933,400.............................................................. 3,403,700
Franchise cost, net of accumulated amortization of $43,900.................... 36,800
------------
Total assets............................................................ $ 4,744,800
============
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Accounts payable.............................................................. $ 120,800
Accrued liabilities........................................................... 701,500
Due to affiliates............................................................. 1,429,200
------------
Total liabilities...................................................... 2,251,500
------------
PARTNERSHIP CAPITAL (DEFICIT):
General Partner............................................................... (47,900)
Limited Partners.............................................................. 2,541,200
------------
Total Partnership capital.............................................. 2,493,300
------------
Total liabilities and Partnership capital.............................. $ 4,744,800
============
See accompanying notes to condensed financial statements.
ENSTAR INCOME PROGRAM 1984-1, L.P.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Period
For the Period Three Months from January 1, Nine Months
from July 1, 2003 Ended 2003 to July Ended
to July 31, 2003 September 30, 31, 2003 (see September 30,
(see Note 2) 2002 Note 2) 2002
---------------- -------------- -------------- --------------
REVENUES........................................................... $ 230,000 $ 747,700 $ 1,646,900 $ 2,502,200
OPERATING EXPENSES:
Service costs................................................... 134,300 368,800 964,500 1,105,700
General and administrative expenses............................. 70,700 211,400 434,800 601,200
General partner management fees and reimbursed expenses......... 18,700 100,900 159,100 307,600
Depreciation and amortization................................... 81,800 220,700 589,700 723,100
Asset impairment charge......................................... -- 1,433,700 100,000 1,433,700
---------------- -------------- -------------- --------------
305,500 2,335,500 2,248,100 4,171,300
---------------- -------------- -------------- --------------
Operating loss............................................. (75,500) (1,587,800) (601,200) (1,669,100)
---------------- -------------- -------------- --------------
OTHER INCOME:
Interest income................................................. -- 5,900 4,300 15,900
Other........................................................... 6,800 -- (16,200) 2,200
---------------- -------------- -------------- --------------
6,800 5,900 (11,900) 18,100
---------------- -------------- -------------- --------------
NET LOSS .......................................................... $ (68,700) $ (1,581,900) $ (613,100) $ (1,651,000)
================ ============== ============== ==============
NET LOSS ALLOCATED TO GENERAL PARTNER.............................. $ (700) $ (15,800) $ (6,100) $ (16,500)
================ ============== ============== ==============
NET LOSS ALLOCATED TO LIMITED PARTNERS............................. $ (68,000) $ (1,566,100) $ (607,000) $ (1,634,500)
================ ============== ============== ==============
NET LOSS PER UNIT OF LIMITED PARTNERSHIP INTEREST.................. $ (2.27) $ (52.31) $ (20.27) $ (54.59)
================ ============== ============== ==============
LIMITED PARTNERSHIP UNITS OUTSTANDING
DURING PERIOD...................................................... 29,940 29,940 29,940 29,940
================ ============== ============== ==============
See accompanying notes to condensed financial statements.
ENSTAR INCOME PROGRAM 1984-1, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the
period from
January 1, Nine Months
2003 to July Ended
31, 2003 (see September 30,
Note 2) 2002
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................................ $ (613,100) $ (1,651,000)
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation and amortization................................................ 589,700 723,100
Asset impairment charge...................................................... 100,000 1,433,700
Changes in:
Accounts receivable, prepaid expenses and other assets....................... 60,700 87,700
Accounts payable, accrued liabilities and due to affiliates.................. (694,900) 202,500
------------- -------------
Net cash from operating activities....................................... (557,600) 796,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................................ (74,800) (1,617,000)
Other investing activities...................................................... -- (200)
------------- -------------
Net cash from investing activities....................................... (74,800) (1,617,200)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Other financing activities...................................................... -- 10,900
------------- -------------
Net cash from financing activities....................................... -- 10,900
------------- -------------
Net decrease in cash .................................................... (632,400) (810,300)
CASH, beginning of period.......................................................... 1,185,600 2,222,100
------------- -------------
CASH, end of period................................................................ $ 553,200 $ 1,411,800
============= =============
See accompanying notes to condensed financial statements.
ENSTAR INCOME PROGRAM 1984-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements
for Enstar Income Program 1984-1, L.P. (the Partnership) as of September 30,
2003, and for the three and nine months ended September 30, 2003 and 2002, are
unaudited. These condensed interim financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K for the year ended December 31,
2002. In the opinion of management, the condensed interim financial statements
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of such periods. The results of
operations for the period from July 1, 2003 to July 31, 2003 and the three
months ended September 30, 2002, as well as the period from January 1, 2003 to
July 31, 2003 and the nine months ended September 30, 2002 and the changes in
net assets in liquidation for the period from August 1 to September 30, 2003 are
not necessarily indicative of results for the entire year.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. These estimates include useful lives of
property, plant and equipment, valuation of long-lived assets and allocated
operating costs. Actual results could differ from those estimates.
As discussed in Note 2, the financial statements as of
September 30, 2003 are presented on a liquidation basis of accounting.
Accordingly, the financial information in the condensed statement of changes in
net assets in liquidation for the period from August 1 to September 30, 2003 is
presented on a different basis of accounting than the financial statements for
the periods from July 1 to July 31, 2003 and January 1 to July 31, 2003 and the
three and nine months ended September 30, 2002, which were prepared on the
historical cost basis of accounting. As a result, depreciation and amortization
ceased upon conversion to liquidation accounting and capital expenditures are
expensed as incurred.
Certain reclassifications have been made to conform to
current period presentation.
2. LIQUIDATION ACCOUNTING AND SALES OF CABLE
SYSTEMS
Effective August 31, 2003, pursuant to an asset purchase
agreement dated November 8, 2002 as amended, the Partnership completed the sale
of its remaining cable systems to Telecommunications Management, LLC
(Telecommunications Management) for a total adjusted sales price of
approximately $2,909,800 (approximately $575 per customer acquired), subject to
post closing adjustments (the Telecommunications Management Sale). The
Telecommunications Management Sale was part of a larger transaction in which the
Partnership and eight other affiliated partnerships sold all of their remaining
assets used in the operations of their respective cable systems to
Telecommunications Management for a total cash sales price of $12,354,600 after
closing adjustments.
The Partnership finalized its proposed plan of liquidation in
July 2003 in connection with the mailing of the proxy to obtain partner approval
for the sale of the Partnership's final cable systems and the subsequent
liquidation and dissolution of the Partnership. In August 2003, the required
number of votes necessary to approve the Telecommunications Managament Sale and
subsequent liquidation and dissolution of the Partnership were obtained. As a
result, the Partnership changed its basis of accounting to the liquidation basis
as of July 31, 2003. Accordingly, the assets in the accompanying statements of
net assets in liquidation as of September 30, 2003 have been stated at estimated
realizable values and the liabilities have been stated at estimated settlement
amounts. The change to liquidation basis accounting resulted in an increase to
property, plant and equipment of $87,700 and recognition of a liability for
expected operating losses through the effective date of sale (August 31, 2003)
of $38,100. In addition, estimated accrued costs of liquidation of $77,300 were
recorded in accounts payable and accrued liabilities on the accompanying
statement of net assets in liquidation as an estimate of costs to be incurred
subsequent to the sale of the system but prior to final dissolution of the
Partnership and an asset of $54,700 was recorded in Due from General Partners
representing negative capital account balances expected to be funded by the
General Partners. The statements of operations and cash flows for the period
from January 1, 2003 through July 31, 2003 do not reflect the effects of the
change to the liquidation basis of accounting. Net assets in liquidation as of
September 30, 2003 represent the estimated distributions to the Limited Partners
and the General Partners. Distributions ultimately made to the partners upon
liquidation will differ from the net assets in liquidation recorded in the
accompanying statements of net assets in liquidation as of September 30, 2003 as
a result of post-closing adjustments to the sale proceeds received by the
Partnership and adjustments to estimated costs of liquidation.
The Corporate General Partner's intention is to terminate the
Partnership as expeditiously as possible. After paying or providing for the
payment of the expenses of the sale, the Corporate General Partner will make one
or more distributions of the Partnership's allocable share of the remaining net
sale proceeds, in accordance with its partnership agreement. In November 2003
the Partnership intends to make an initial distribution payment of $1.6 million
to the Limited Partners. A final liquidating distribution will occur on or after
approximately 13 months following the close of the transaction upon the release
of the indemnity escrow and the receipt of the remaining proceeds of such escrow
if any.
3. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
The Partnership has a management and service agreement
(the Management Agreement) with Enstar Cable Corporation ("Enstar Cable"), a
wholly owned subsidiary of Enstar Communications Corporation, the Corporate
General Partner, for a monthly management fee of 5% of gross revenues.
Management fee expense approximated $22,800 ($11,300 for the period from August
1 to September 30, 2003) and $37,400 for the three months ended September 30,
2003 and 2002, respectively, and $93,700 ($11,300 for the period from August 1
to September 30, 2003) and $125,100 for the nine months ended September 30, 2003
and 2002, respectively. Management fees are non-interest bearing.
In addition to the monthly management fee, the Partnership
reimburses Enstar Cable for direct expenses incurred on behalf of the
Partnership, and for the Partnership's allocable share of operational costs
associated with services provided by Enstar Cable. Additionally, Charter
Communications Holding Company, LLC and its affiliates (collectively, Charter)
provide other management and operational services for the Partnership. These
expenses are charged to the properties served based primarily on the
Partnership's allocable share of operational costs associated with the services
provided. The total amount charged to the Partnership for these services and
direct expenses was $14,600 ($7,400 for the period from August 1 to September
30, 2003) and $63,500 for the three months ended September 30, 2003 and 2002,
respectively, and $84,100 ($7,400 for the period from August 1 to September 30,
2003) and $182,500 for the nine months ended September 30, 2003 and 2002,
respectively.
Substantially all programming services are purchased through
Charter. Charter charges the Partnership for these costs based on its costs. The
Partnership recorded programming fee expense of $129,500 ($64,400 for the period
from August 1 to September 30, 2003) and $190,300 for the three months ended
September 30, 2003 and 2002, respectively, and $529,800 ($64,400 for the period
from August 1 to September 30, 2003) and $608,200 for the nine months ended
September 30, 2003 and 2002, respectively. Programming fees are included in
service costs in the accompanying condensed statements of operations and
statement of changes in net assets in liqudation.
4. CERTAIN TRENDS AND UNCERTAINTIES
The Partnership's franchise agreement with the City of
Covington, Tennessee ("the City") expired in 1994. By agreement with the City,
the Partnership continued to operate the cable system in Covington and pay
franchise fees to the City on a month-to-month basis until a new franchise
agreement was reached. In March 2000, the Corporate General Partner submitted a
renewal proposal to the City on behalf of the Partnership. In November 2000, the
City sold municipal bonds to finance construction of a municipally-owned cable
system. The City completed the construction project in the first quarter of 2002
and actively competed with the Partnership.
In July 2002, the Partnership received a letter from the City
Attorney advising the Partnership that it may not operate within the city limits
and demanding the Partnership discontinue service within thirty days. On August
7, 2002, the Corporate General Partner filed a lawsuit on behalf of the
Partnership in the United States District Court for the Western District of
Tennessee ("the Court") against the City, the Covington Electric System Board of
Public Utilities and Covington Cable. The Partnership alleged that the City and
other defendants unlawfully attempted to shut down the Partnership's cable
television system in Covington, in order to eliminate competition to the new
City-owned cable system. The Partnership also alleged that the City failed to
follow the federal statutory procedures governing the renewal of a cable
television franchise and attempted to shut down the Partnership's cable system,
without having complied with those procedures or even formally having denied the
numerous renewal proposals, in contravention of federal law. The Partnership
sought a declaration from the Court that the City's actions were unlawful and
violated the 1992 Cable Act, franchise provisions, federal antitrust laws, state
common law, the Tennessee Consumer Protection Act and both the United States and
Tennessee Constitutions. The Partnership also sought a preliminary injunction
against all three defendants. The defendants agreed to take no action against
the Partnership's provision of services in Covington until the Court ruled on
the motion for preliminary injunction. In November 2003, the Corporate General
Partner filed a notice to dismiss the lawsuit with the Court.
As disclosed in Charter's Quarterly Report on Form 10-Q, the
parent of the Corporate General Partner and the Manager is the defendant in
twenty-two class action and shareholder lawsuits and is the subject of a grand
jury investigation being conducted by the United States Attorney's Office for
the Eastern District of Missouri into certain of its accounting and reporting
practices, focusing on how Charter reported customer numbers and its reporting
of amounts received from digital set-top terminal suppliers for advertising. The
United States Attorney's Office has publicly stated that Charter is not
currently a target of the investigation. Charter has also been advised by the
United States Attorney's Office that no member of its board of directors,
including its Chief Executive Officer, is a target of the investigation. On July
24, 2003, a federal grand jury charged four former officers of Charter with
conspiracy and mail and wire fraud, alleging improper accounting and reporting
practices focusing on revenue from digital set-top terminal suppliers and
inflated subscriber account numbers. On July 25, 2003, one of the former
officers who was indicted entered a guilty plea. Charter has informed the
Corporate General Partner that they are fully cooperating with the
investigation.
Charter is unable to predict the outcome of the class action
lawsuits and government investigations at this time. An unfavorable outcome of
these matters could have a material adverse effect on Charter's results of
operations and financial condition which could in turn have a material adverse
effect on the Partnership.
5. ASSET IMPAIRMENT CHARGE
The asset impairment charge of $100,000 for the period
from January 1, 2003 to July 31, 2003 represents a write down of property plant
and equipment related to our Brownsville, Tennessee cable system to its
estimated fair value. It became apparent during the second quarter of 2003 that
based on subscriber losses during the three months ended June 30, 2003, the book
value of the systems would not be realized. As a result, an asset impairment
charge of $100,000 related to our Brownsville, Tennessee cable system was
recorded in the second quarter of 2003.
During the three months ended September 30, 2002, the
Partnership recorded an asset impairment charge of $1,433,700 on the property,
plant and equipment related to its Snow Hill, North Carolina cable system. It
became apparent during the third quarter of 2002, that based on the status of
negotiations for the sale of the cable system, the book value of the system
would not be realized. As such the assets were written down to their estimated
fair value.
6. NET LOSS PER UNIT OF LIMITED PARTNERSHIP INTEREST
The amended Partnership Agreement generally provides that
all partnership profits, gains, losses, credits, and cash distributions (all as
defined) from operations or liquidation (including those attributable to the
sale or other disposition of systems) be allocated 1% to the Corporate General
Partner and 99% to the Limited Partners until the Limited Partners have received
distributions of cash flow from operations and/or cash flow from sales,
refinancing, or liquidation of systems equal to their initial investment. After
the Limited Partners have received cash flow equal to their initial investment,
the Corporate General Partner will only receive a 1% allocation of cash flow
from liquidating a system until the Limited Partners have received an annual
simple interest return of at least 18% of their initial investment less any
distributions from previous system liquidations. Thereafter, allocations will be
made 15% to the Corporate General Partner and 85% to the Limited Partners. All
allocations to individual Limited Partners will be based on their respective
capital accounts. The Partnership Agreement limits the amount of debt the
Partnership may incur.
Upon dissolution of the Partnership, any negative capital
account balances remaining after all allocations and distributions are made must
be funded by the respective partners. Due from General Partners as of September
30, 2003 represents negative capital account balances that are expected to be
funded by the General Partners.
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
This report includes certain forward-looking statements
regarding, among other things, our future costs of liquidation, legal
requirements, and our estimated future distributions. Such forward-looking
statements involve risks and uncertainties including, without limitation, the
uncertainty of legislative and regulatory changes and the costs required to
liquidate the Partnership. In addition to the information provided herein,
reference is made to our Annual Report on Form 10-K for the year ended December
31, 2002 for additional information regarding such matters and the effect
thereof on our business.
Effective August 31, 2003, pursuant to an asset purchase
agreement dated November 8, 2002 as amended, the Partnership completed the sale
of its only remaining cable system to Telecommunications Management, LLC
(Telecommunications Management) for a total adjusted sales price of
approximately $2,909,800 (approximately $575 per customer acquired), subject to
post closing adjustments (the Telecommunications Management Sale). The
Telecommunications Management Sale was part of a larger transaction in which the
Partnership and eight other affiliated partnerships sold all of their remaining
assets used in the operations of their respective cable systems to
Telecommunications Management for a total cash sales price of $12,354,600 after
closing adjustments.
The Partnership finalized its proposed plan of liquidation in
July 2003 in connection with the mailing of the proxy to obtain partner approval
for the sale of the Partnership's final cable systems and the subsequent
liquidation and dissolution of the Partnership. In August 2003, the required
number of votes necessary to approve the Telecommunications Managament Sale and
subsequent liquidation and dissolution of the Partnership were obtained. As a
result, the Partnership changed its basis of accounting to the liquidation basis
as of July 31, 2003. Accordingly, the assets in the accompanying statements of
net assets in liquidation as of September 30, 2003 have been stated at estimated
realizable values and the liabilities have been stated at estimated settlement
amounts. The change to liquidation basis accounting resulted in an increase to
property, plant and equipment of $87,700 and recognition of a liability for
expected operating losses through the effective date of sale (August 31, 2003)
of $38,100. In addition, estimated accrued costs of liquidation of $77,300 were
recorded in accounts payable and accrued liabilities on the accompanying
statement of net assets in liquidation as an estimate of costs to be incurred
subsequent to the sale of the system but prior to final dissolution of the
Partnership and an asset of $54,700 was recorded in Due from General Partners
representing negative capital account balances expected to be funded by the
General Partners. The statements of operations and cash flows for the period
from January 1, 2003 through July 31, 2003 do not reflect the effects of the
change to the liquidation basis of accounting. Net assets in liquidation as of
September 30, 2003 represent the estimated distributions to the Limited Partners
and the General Partners. Distributions ultimately made to the partners upon
liquidation will differ from the net assets in liquidation recorded in the
accompanying statements of net assets in liquidation as of September 30, 2003 as
a result of post-closing adjustments to the sale proceeds received by the
Partnership and adjustments to estimated costs of liquidation.
RESULTS OF OPERATIONS
The Partnership operated its properties through August
31, 2003 but had no operations for the period subsequent to that date as a
result of the Telecommunications Management Sale discussed above. Accordingly,
no discussion of operating results for the period from July 1, 2003 to September
30, 2003 and the three months ended September 30, 2002, as well as the period
from January 1, 2003 to September 30, 2003 and the nine months ended September
30, 2002, has been provided as such analysis is not relevant.
Net assets in liquidation at September 30, 2003 were
$1,869,000 consisting of current assets of $3,269,500, offset by current
liabilities of $1,400,500.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased $1,908,300 from
$1,185,600 at December 31, 2002 to $3,093,900 at September 30, 2003 primarily
due to proceeds from the Telecommunications Management Sale of $2,909,800 offset
by repayments of $1,162,100 on the amounts due to affiliates. Cash and cash
equivalents decreased $1,036,500 from $2,222,100 at December 31, 2001 to
$1,185,600 at September 30, 2002 as a result of capital expenditures of
$1,617,000 offset by $796,000 of cash used by operating activities. Capital
expenditures for the period from January 1, 2003 to August 31, 2003 were
$118,300.
The Corporate General Partner's intention is to terminate the
Partnership as expeditiously as possible. After paying or providing for the
payment of the expenses of the sale, the Corporate General Partner will make one
or more distributions of the Partnership's allocable share of the remaining net
sale proceeds, in accordance with its partnership agreement. In November 2003 we
intend to make an initial distribution payment of $1.6 million to the Limited
Partners. A final liquidating distribution will occur on or after approximately
13 months following the close of the transaction upon the release of the
indemnity escrow and the receipt of the remaining proceeds of such escrow if
any.
CERTAIN TRENDS AND UNCERTAINTIES
Our franchise agreement with the City of Covington,
Tennessee ("the City") expired in 1994. By agreement with the City, we continued
to operate the cable system in Covington and pay franchise fees to the City on a
month-to-month basis until a new franchise agreement was reached. In March 2000,
the Corporate General Partner submitted a renewal proposal to the City on our
behalf. In November 2000, the City sold municipal bonds to finance construction
of a municipally-owned cable system. The City completed the construction project
in the first quarter of 2002 and actively competed with us.
In July 2002, the Partnership received a letter from the City
Attorney advising the Partnership that it may not operate within the city limits
and demanding the Partnership discontinue service within thirty days. On August
7, 2002, the Corporate General Partner filed a lawsuit on behalf of the
Partnership in the United States District Court for the Western District of
Tennessee ("the Court") against the City, the Covington Electric System Board of
Public Utilities and Covington Cable. The Partnership alleged that the City and
other defendants unlawfully attempted to shut down the Partnership's cable
television system in Covington, in order to eliminate competition to the new
City-owned cable system. The Partnership also alleged that the City failed to
follow the federal statutory procedures governing the renewal of a cable
television franchise and attempted to shut down the Partnership's cable system,
without having complied with those procedures or even formally having denied the
numerous renewal proposals, in contravention of federal law. The Partnership
sought a declaration from the Court that the City's actions were unlawful and
violated the 1992 Cable Act, franchise provisions, federal antitrust laws, state
common law, the Tennessee Consumer Protection Act and both the United States and
Tennessee Constitutions. The Partnership also sought a preliminary injunction
against all three defendants. The defendants agreed to take no action against
the Partnership's provision of services in Covington until the Court ruled on
the motion for preliminary injunction. In November 2003, the Corporate General
Partner filed a notice to dismiss the lawsuit with the Court.
Charter and our Corporate General Partner have had
communications and correspondence with representatives of certain limited
partners, and others, concerning certain Enstar partnerships of which our
Corporate General Partner is also the Corporate General Partner. While we are
not aware of any formal litigation which has been filed relating to the
communications and correspondence, or the subject matter referred to therein, it
is impossible to predict what actions may be taken in the future or what loss
contingencies may result therefrom.
As disclosed in Charter's Quarterly Report on Form 10-Q, the
parent of the Corporate General Partner and the Manager is the defendant in
twenty-two class action and shareholder lawsuits and is the subject of a grand
jury investigation being conducted by the United States Attorney's Office for
the Eastern District of Missouri into certain of its accounting and reporting
practices, focusing on how Charter reported customer numbers and its reporting
of amounts received from digital set-top terminal suppliers for advertising. The
United States Attorney's Office has publicly stated that Charter is not
currently a target of the investigation. Charter has also been advised by the
United States Attorney's Office that no member of its board of directors,
including its Chief Executive Officer, is a target of the investigation. On July
24, 2003, a federal grand jury charged four former officers of Charter with
conspiracy and mail and wire fraud, alleging improper accounting and reporting
practices focusing on revenue from digital set-top terminal suppliers and
inflated subscriber account numbers. On July 25, 2003, one of the former
officers who was indicted entered a guilty plea. Charter has informed the
Corporate General Partner that they are fully cooperating with the
investigation.
Charter is unable to predict the outcome of the class action
lawsuits and government investigations at this time. An unfavorable outcome of
these matters could have a material adverse effect on Charter's results of
operations and financial condition which could in turn have a material adverse
effect on us.
ITEM 4. CONTROLS AND PROCEDURES.
As of the end of the period covered by this report, our
Corporate General Partner, including our Chief Administrative Officer and
Principal Financial Officer, evaluated the effectiveness of the design and
operation of our disclosure controls and procedures with respect to the
information generated for use in this Quarterly Report. The evaluation was based
in part upon reports and affidavits provided by a number of executives. Based
upon, and as of the date of that evaluation, our Chief Administrative Officer
and Principal Financial Officer concluded that the disclosure controls and
procedures were effective to provide reasonable assurances that information
required to be disclosed in the reports we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Commission's rules and forms.
There was no change in our internal control over financial
reporting during the quarter ended September 30, 2003 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
In designing and evaluating the disclosure controls and
procedures, our management recognized that any controls and procedures, no
matter how well designed and operated, can provide only reasonable, not
absolute, assurance of achieving the desired control objectives and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Based upon the above
evaluation, we believe that our controls do provide such reasonable assurances.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
SALES PROPOSAL. The holders of limited partnership units
voted to approve the sale of the Partnership's remaining cable systems and the
subsequent liquidation and dissolution of the Partnership to Telecommunications
Management, LLC.
The voting results to approve the sale are: